We use cookies on this website, including web analysis cookies. By using this site, you agree that we may store and access cookies on your device. You have the right to opt out of web analysis at any time. Find out more about our cookie policy and how to opt out of web analysis.

Education and human capital

Education shows great resilience to shocks—labor demand for highly skilled workers has remained high in all kinds of economic conditions. Public policy for education and human capital includes increasing the economic and social returns on education, fostering greater educational attainment, encouraging social and economic mobility, and providing vocational education, training, and lifelong learning.

Better information on university quality may
reduce underemployment and overeducation in developing countries

As the number of secondary school graduates
rises, many developing countries expand the supply of public and private
universities or face pressure to do so. However, several factors point to
the need for caution, including weak job markets, low-quality university
programs, and job–education mismatches. More university graduates in this
context could exacerbate unemployment, underemployment, and overeducation of
professionals. Whether governments should regulate the quantity or quality
of university programs, however, depends on the specific combination of
factors in each country.

Postponing school tracking can increase social
mobility without significant adverse effects on educational achievement

The goal of school tracking (assigning students
to different types of school by ability) is to increase educational
efficiency by creating more homogeneous groups of students that are easier
to teach. However, there are concerns that, if begun too early in the
schooling process, tracking may improve educational attainment at the cost
of reduced intergenerational social mobility. Recent empirical evidence
finds no evidence of an efficiency–equality trade-off when tracking is
postponed.

Education benefits individuals, but the societal benefits are
likely even greater

Formal schooling increases earnings and provides other
individual benefits. However, societal benefits of education may exceed individual benefits.
Research finds that higher average education levels in an area are correlated with higher
earnings, even for local residents with minimal education. Science, technology, engineering,
and mathematics (STEM) graduates appear to generate especially strong external effects, due to
their role in stimulating innovation and economic growth. Several strategies to test for
causality find human capital externalities do exist.

Cognitive skills are more relevant in explaining earnings,
socio-emotional skills in determining labor supply and schooling

Common proxies, such as years of education, have been shown to
be ineffective at capturing cross-country differences in skills acquisition, as well as the
role they play in the labor market. A large body of research shows that direct measures of
skills, in particular cognitive and socio-emotional ones, provide more adequate estimations of
individuals’ differences in potential productive capacity than the quantity of education they
receive. Evidence shows that cognitive skills in particular are quite relevant to explain
wages, while socio-emotional skills are more associated with labor force and education
participation decisions.

The role of social interactions in modifying individual behavior is central to many fields of social science. In education, one essential aspect is that “good” peers can potentially improve students’ academic achievement, career choices, or labor market outcomes later in life. Indeed, evidence suggests that good peers are important in raising student attainment, both in compulsory schooling and university. Interventions that change the ability group composition in ways that improve student educational outcomes without exacerbating inequality therefore offer a promising basis for education policies.

Employment has grown steadily and the gender gap
and skill premiums have fallen

New Zealand is a small open economy, with large
international labor flows and skilled immigrants. Since 2000, employment
growth has kept pace with strong migration-related population growth. While
overall employment rates have remained relatively stable, they have
increased substantially for older workers. In contrast, younger workers as
well as the Maori and Pasifika ethnic groups experienced a sharp decline in
employment rates and a rise in unemployment around the time of the global
financial crisis. Wage gains have been modest and there has been a
compression of earnings differentials by gender as well as by skill.

Unemployment rose only modestly during the Great
Recession and fell strongly since, with productivity and wages lagging
behind

Experiences during the Great Recession support the view that the UK labor
market is relatively flexible. Unemployment rose less and recovered faster
than in most other European economies. However, this success has been
accompanied by a stagnation of productivity and wages; an open question is
whether this represents a cyclical phenomenon or a structural problem. In
addition the planned exit of the UK from the EU (Brexit), which is quite
possibly the greatest current threat to the stability of the UK labor
market, is not yet visible in labor market statistics.

Young people experience worse labor market
outcomes than adults worldwide but the difference varies greatly
internationally

In Germany, young people are no worse off than
adults in the labor market, while in southern and eastern European
countries, they fare three to four times worse. In Anglo-Saxon countries,
both youth and adults fare better than elsewhere, but their unemployment
rates fluctuate more over the business cycle. The arrangements developed in
each country to help young people gain work experience explain the striking
differences in their outcomes. A better understanding of what drives these
differences in labor market performance of young workers is essential for
policies to be effective

External school leaving exams raise student
achievement and improve how grades are understood in the labor market

Reaching the policy goal of improving student
achieve­ment by adding resources to the school system has often proven
elusive. By contrast, ample evidence indicates that central exit exams
constitute an important feature of a school system’s institutional
framework, which can hold students, teachers, schools, and administrators
accountable for student outcomes. While critics point to issues such as
teaching test-only skills, which may leave students ill-prepared for the
real world, the evidence does not bear this out. Overall, central exams are
related to better student achievement, favorable labor market outcomes, and
higher economic growth.

Speaking English has its benefits in transition
countries but can it supersede Russian?

In many transition countries, the collapse of
communism ushered in language reforms to adapt to the newfound independence
from the Soviet Union and openness to the rest of the world. Such reforms
may have implications for individuals’ economic opportunities, since foreign
language proficiency may enhance or signal productivity in the labor market.
Recent empirical evidence documents positive labor market returns to English
language skills in transition countries. However, Russian language
proficiency also remains economically valuable, and nationalist language
policies may lead to future loss of economic opportunities.